Dried Tobacco Leaves Undergone Process of Curing is Covered Under ‘Unmanufactured Tobacco’ Taxable At 28% GST: AAR [Read Order]

The Authority for Advance Ruling (AAR), Delhi recently held that Dried Tobacco Leaves which have undergone the process of curing after harvesting of tobacco leaves are ‘unmanufactured tobacco’ covered in HSN Code 2401 and liable to be taxed at the rate of 14% Central Goods & Services Tax (CGST) plus 14% State Goods & Services Tax (SGST) or 28% Integrated Goods & Services Tax (IGST).

The applicant, Shalesh Kumar Singh, purchases Tobacco Leaves from the registered dealer and sells such leaves after cleaning and removing unwanted particles to wholesale market sans branding. The question raised before the AAR was whether Dried Tobacco Leaves on which cleaning and removal of unwanted particles have been done would be classified under ‘Tobacco Leaves’ or ‘Unmanufactured Tobacco and Tobacco Refuse’ if the form and nature of same have still not undergone any change. The applicant also raised the question regarding the tax rate applicable to such product.

Applicant claimed that the Dried Tobacco Leaves as such shall be classifiable under ‘Tobacco Leaves’ and GST at the rate of 5% should be levied on such ‘Dried Tobacco Leaves’ as per the interpretation of Law and common parlance. He also claimed that ‘Dried Tobacco Leaves’ should be covered under ‘Tobacco Leaves’ as per HSN Code List Chapter No.24 Tariff Item 2401 and Notification No. 01/2017 Central Tax (Rate), dated 28.06.2017.

The Authority comprising od Members Prakash Jain & Vunay Kumar observed “since the goods proposed to be supplied by the applicant are admittedly undergone curing by Sun-dry/Air-dry processes, the same cannot be called ‘Tobacco Leaves’ and would be covered as ‘unmanufactured tobacco (other than tobacco leaves).”